hello YouTube Richard founder of
short-term rental secrets calm and
Airbnb super host one of the most
frequent questions I get and I
absolutely love it because it shows like
grit and gung-ho and people wanting to
be entrepreneurial is how can I do
Airbnb full-time now recognize I'm not
gonna be able to address every single
person situations both financial and
their dreams and aspirations but I do
have a way to get started thinking about
this just some rules of thumb some
guidelines and I think you'll find them
helpful so if you're looking for a
get-rich-quick scheme I'm starting
disappointing this is a mess this is
gonna require time and energy and you're
gonna build up for it let's open up the
hood and get underneath it and just
start to look at what these numbers look
like to give you a ballpark as a goal
let's just say the home costs about
$400,000 let's say that you put down 20%
which i think is the least you want to
put down and let's say that you get a
30-year fixed mortgage in September of
2017 that you can get that at about 4%
so let's just go through that again
$400,000 purchase price $80,000 down
payment you do need extra cash to pay
the lawyers and the title insurance and
closing costs 4% interest rate I
recommend a 30-year fixed or a 15-year
fixed more on that a little bit later
when I take a look at an online
calculator the payment is fifteen
hundred and twenty eight dollars per
month so in order to pay this mortgage
and own the property outright for thirty
years you're gonna have a fixed payment
of one thousand five hundred and twenty
eight dollars and then you're gonna have
expenses on top of that taxes repairs
utilities and so on and so you can pick
any number that you would like when you
do your numbers I'm gonna say it's
another thousand dollars a month which
should cover taxes and most utilities
and so on so the monthly amount that I
would need is twenty five hundred
dollars a month to pay for this property
for the next thirty years and in order
to generate the kind of return that I'm
looking to generate let's say I want
this property to generate two thousand
dollars a month and free cash flow to me
so now I need to generate forty five
hundred dollars twenty-five hundred to
pay the mortgage and all the expenses
plus my two thousand dollar desired
profit per month so my monthly nut is
forty five
five hundred dollars I like to assume a
occupancy rate of about 70 percent seven
zero so what that means is on a monthly
basis there's thirty days in a month
when you multiply that times 0.7 it
turns out to be twenty-one days so now
the very simple math is I'm gonna take
forty five hundred dollars a month which
is what I need
divided by 21 and that gives me what I
need to make per night each of those 21
nights so when you do the math it's two
hundred and fourteen dollars per night
it's a little bit more because Airbnb is
gonna charge some fees but let's just
say it's two hundred twenty-five dollars
a night now when you go and look at the
properties and the neighborhood can you
need to think about this can the
property command two hundred and
twenty-five dollars a night if it's a
small studio in a very urban city like
New York City likely yes if it's a small
studio in the middle of you know a rural
area two hundred twenty-five dollars
might be way out of the ballpark and
that's probably not a good investment
okay so in this really simple example
just not even on an envelope right we're
just talking out loud here generates two
thousand dollars a month now it's not
gonna be consistent every single month
you might have a great month you make
three thousand you have a bad month to
make one thousand but let's just assume
on average you're making two thousand
dollars a month that's twenty four
thousand dollars a year in profit that's
probably not enough for you to live on
and to leave your full-time job so take
a look at what your desired income is
and your cost of living and so on and
just multiply it by that number of
houses so if you need forty eight
thousand you need two of these if you
need seventy-two you need three of these
and just do the math yourself and figure
out how many homes you have and again
it's not a get-rich-quick scheme I'm not
assuming that you have this big pile of
money and you can just go put down 20%
every time you want to buy a home but
what you can do is continue to work
full-time take the first twenty four
thousand the first twelve months of your
labor and instead of spending it and
doing nice vacations and fancy dinners
put it aside do that for a year two
years three years however long you need
to do it until you save enough for your
down payment and then get started and
then do that again now I recommend for
somebody getting started the 30-year
fixed mortgage because we're in a rising
interest rate environment for those of
you that don't know I spent a long time
on Wall Street where at all-time lows
and interest rates it's a great time to
get a more
but I would not recommend a floating
rate mortgage even though it's less
expensive on a monthly basis because as
we go into a rising interest rate
environment your mortgage payments are
going to be floating and they could go
up and up and up and in most of these
floating rate notes the upper bound is
ridiculous it's like 17 percent for
those of you who don't know check the
historical interest rates in the 1980s
they were 17% imagine paying 17% for
your mortgage when today you could lock
in a 30-year mortgage at 4% I don't
recommend it there's no point in that
your vision is longer dated than
month-to-month so lock in a 30-year for
me I use 15 years because it allows me
to shave 15 years of payments off now
that means that I'm forced savings more
I'm not using the cash flow the profit
of the property to fund my lifestyle or
to fund other purchases what I'm really
doing is taking that extra savings and
putting it right into the equity in that
property all right so this is a lot I
want to just recap it here so that we're
all on the same page in order to get
started you're gonna need some amount of
money for a down payment I recommend 20%
I recommend getting a fixed mortgage I
recommend buying a property that's not a
super stretch for you and I recommend
doing the math once you do all that take
a look at what you need to make for your
mortgage add your expenses and taxes and
put in a buffer and cushion for all of
your expenses you know maybe add 10 or
15% versus your projection just as a
safety buffer and then on top of that
add your prop desired profit and that's
your new monthly nut divided by the
occupancy rate that you are think is
capable do not use 90 percent do not use
80 percent to assume the worst I use 70
percent once you know how much you're
making on a given property you know how
many you need in order to live the
lifestyle that you want to fund and go
ahead and do that so you might need
three or four or five it's totally
personal preference and recognize that
over time chances are you get better at
this you make better investments you buy
properties properly your rent increases
your occupancy rate increases so this is
just a baseline to get you started I'd
love to hear your comments and feedback
share with us what you're thinking we'll
do more of these videos I think we're
going to start to get a little bit more
into how to get started how to grow it
how to do these things
again we're at you're like you know
direction so share with us if you think
this is helpful like the video and if
you haven't subscribed
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